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Counting All The Costs Recognising the carbon subsidy to polluting energy

Policy Brief

Contents

September 2014

Summary

3

Why do energy subsidies matter?

4

Energy subsidies in Australia

6

Tackling the implicit subsidy of unpriced carbon pollution

8

BOX: Developing carbon values by calculating the social cost of carbon

Cover Image: Michael Hall, Creative Fellow of The Climate Institute 2012-14

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Acknowledgements This policy brief was written by Olivia Kember with contributions from Erwin Jackson and John Connor. We also thank Clare Pinder for her input. The views expressed in this policy brief remain those of The Climate Institute.

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Summary

Australia’s energy sector has a long history of subsidies, ranging from government-built infrastructure to favourable taxation regimes. The most significant current subsidy is the unpriced cost of carbon emissions, measured as the impacts of climate change on economic growth, environmental systems, health, and security. Excluding the cost of carbon pollution from decision-making creates market distortions and the undervaluation of emission reduction. This in turn results in investment and policy settings that cannot enable the long-term deep decarbonisation that is necessary for Australia to contribute to the globally agreed goal of avoiding global warming of 2°C or more. It also results in the transfer of the risks and costs of climate change away from those responsible for producing emissions and onto the community. In short, it allows carbon-intensive energy companies to privatise their gains and socialise their losses. Other countries and institutions have begun to address this “carbon subsidy” by incorporating the costs of carbon pollution in public policy-making. The United States, for example, has developed carbon valuation pathways that approximate what society should be willing to pay to reduce carbon pollution. These pathways inform the development of regulations to reduce emissions. Similarly, the United Kingdom uses carbon values to test any policies that reduce or increase emissions against the country’s 2050 emission goal, which is derived from the international agreement to keep climate change below 2°C. The International Monetary Fund (IMF) recently calculated the real costs of fossil fuels for over 150 countries including Australia, using a carbon cost of US$35 per tonne.

Applying carbon valuations developed by the US government to carbon pollution from Australia’s energy sector reveals an implicit “carbon subsidy” of approximately $14-39 billion annually. This is provided to emitters across electricity, transport, direct combustion and fugitive emissions.1 The electricity sector alone receives a carbon subsidy of about $7-20 billion a year. Without policies to significantly cut energy emissions, the carbon subsidy to energy will continue to grow. The annual carbon subsidy to non-electricity energy is projected to be about $1236 billion by 2020 and $16-49 billion by 2030. The size of the carbon subsidy to electricity will be influenced by any changes to the Renewable Energy Target (RET). The RET is effectively a subsidy to renewable electricity providers, with resource costs of approximately $14 billion (net present value) between now and 2030. These costs are far smaller than the carbon subsidy provided to coal and gasfired power companies. Under the current legislated RET, the annual subsidy would be $9-28 billion by 2020 and $12-37 billion by 2030; in total the subsidy between 2015 and 2030 would be $165-500 billion. However, under a reduced RET the subsidy would increase by about $0.7-2 billion annually. If the RET were abolished altogether (and current arrangements grandfathered), the carbon subsidy would increase by about $0.8-2.5 billion annually.

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Why do energy subsidies matter?

“Many energy prices in many countries are wrong. They are set at levels that do not reflect environmental damage, notably global warming, air pollution, and various side effects of motor vehicle use. In so doing, many countries raise too much revenue from direct taxes on work effort and capital accumulation and too little from taxes on energy use.” International Monetary Fund

Getting Energy Prices Right 2014

Governments subsidise energy production and/or consumption in a range of ways and for a range of reasons. Subsidies may be explicit or implicit. Explicit financial subsidies include tax deductions for activities related to exploration or production, government investment in research and development, public spending on fuel transport infrastructure, such as power stations or pipelines, and policies that provide above-market revenues or hold prices below market rates. Implicit subsidies are created by allowing energy producers or users to avoid paying the costs of any damage their activities cause. Such externalised costs include air pollution, carbon emissions and congestion, among others. The International Energy Agency (IEA) notes that key rationales for energy subsidies are to promote economic development and technological advancement. However, the IEA also notes that poorly directed subsidies result in the misallocation

of costs and resources by “encouraging excessive energy consumption, artificially promoting capitalintensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources” (IEA, 2013). Costs may be transferred from one type of energy producer or consumer to another, or they may be transferred to other groups entirely. For example, air pollution is suffered by those in its vicinity, irrespective of whether they contribute to it; the costs of resulting health impacts may also be paid by taxpayers more broadly. The costs of carbon emissions and climate change are imposed on the public, other nations and future generations. Failure to price the costs of greenhouse gas emissions also inflates the competitiveness of high-carbon energy relative to low-carbon energy. While subsidies may be justified if they address market barriers to innovation in publicly desirable areas (based on the assumption that such innovation will ultimately improve broader public welfare), most existing energy subsidies do not do this. The IEA calculates that subsidies to global fossil fuel consumption alone total about US $540 billion.2 The IMF – looking at both production and consumption subsidies and quantifying the externalised cost of climate change – calculated that global subsidies to fossil fuels in 2011 totalled at least US$1.9 trillion.3 Subsidies to renewable energy technologies, which are considerably less mature, totalled just $88 billion that year.4

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Figure 1. Global subsidies to fossil fuels, 2011 (US$). Source: IMF

Motor fuel taxes generally need to be higher primarily to reflect the costs of accidents and traffic congestion rather than carbon emissions and air pollution.6 Removing subsidies would produce significant benefits. The IMF found that including within energy prices the costs of air pollution and greenhouse gas emissions would reduce global emissions by 13 per cent, or 4.5 billion tonnes. Significant health benefits would also result, due to a 10 million ton reduction in sulphur dioxide (SO2) and a 13 percent reduction in other local air pollutants.7

The IMF notes that coal use is “pervasively undercharged, not only for carbon emissions, but also for the health costs of local air pollution”. Significant tax increases are also necessary to internalise the costs of carbon emissions from natural gas, although air pollution damage from natural gas is “modest” in comparison with coal.5

The longer a subsidy is in place, the more entrenched its impact on market conditions, and the greater the adjustment required to its removal. This means that long-standing subsidies can be extremely difficult to remove, as market participants have factored their existence into decision-making and may be adversely affected by subsidy removal. For this reason, governments often face strong opposition to attempts to reduce or remove energy subsidies.

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Energy subsidies in Australia

Australia has a complex system of energy subsidies. Analysis to date has tended to focus on explicit financial subsidies to energy resource production and under-priced road use. For example, a 1996 report by the National Institute of Economic and Industry Research (NIEIR) estimated annual financial subsidies to the Australian energy and transport sectors at $1.9 billion (in 1994 dollars).8 In 2000, the Senate Environment, Communications, Information Technology and the Arts References Committee cited this figure and found another $4 billion indirectly provided to fossil fuels via “tax incentives, startup grants, preferential purchasing agreements for oil, and biased market structures”. The Committee found renewable energy programs received federal subsidies of $360 million per year. 9 Analysis by the Institute for Sustainable Futures found a wide range of financial subsidies that totalled $9-10 billion in 2005-6. Of this, more than 96 per cent supported fossil fuels, with just over $300 million to support renewable energy and energy efficiency. Among the largest subsidies were the annual $4.7 billion “road user deficit” – the gap between total government revenue from road access and usage charges and the public cost of establishing and maintaining the road network – and government intervention to lower coal costs for electricity generation, worth some $400-1100 million.10 More recent analysis by Environment Victoria and Market Forces found a slightly higher level of fossil fuel subsidies (about $11 billion annually) through a different methodology. This analysis identified fuel tax credits (nearly $6 billion annually), excise concessions for aviation gasoline and turbine fuel ($1.3 billion) and accelerated depreciation for oil,

gas and petroleum extraction ($1.8 billion) as the largest fossil fuel subsidies currently in operation.11 The definition of some of these measures as energy subsidies is contentious. For example, the federal government does not consider the fuel tax credits regime as a subsidy. Excise on diesel fuel was originally introduced to help fund road construction and maintenance; off-road diesel use by mining, agriculture and other industries should therefore not be subject to the excise.12 13 14 On the other hand, fuel excise is not hypothecated to road funding, and as many changes to the excise regime have been to increase general revenue rather than to direct more resources at roads the provision of credits to some industries and not others may be considered a subsidy to the former.15 Through the G20, Australia in 2009 committed to “rationalize and phase out over the medium term inefficient fossil fuel subsidies”.16 The federal government concluded in 2010 that none of Australia’s existing federal policies constitute such subsidies: “Australia does not have any sectorspecific tax expenditures for fossil fuel production (although fossil fuel producers are able to access general measures that apply across the economy or across the mining and quarrying sector as a whole).”17 Subsidy watchdog Oil Change International notes that this wording excludes “policies that have the effect, though not the intent, of subsidizing fossil-fuels [and] special tax breaks for extractive industries (e.g., percentage depletion) that are generally viewed as subsidies in most other countries in the world.”18 In the past few years, governments have increased and decreased support for renewable energy through a range of policy changes. State governments introduced and then wound back

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feed-in tariffs for solar PV panels. Key avenues for Commonwealth support for renewables are the RET, the Clean Energy Finance Corporation (CEFC), and the Australian Renewable Energy Agency (ARENA). The CEFC and ARENA receive roughly $2.5 billion in annual federal funding (unless both bodies are dismantled, as proposed by the government). The RET and state feed-in tariffs are cross-subsidies, in that support for renewables is provided by other electricity market participants. The government’s recent RET review warned that the RET would result in a “$22 billion cross-subsidy to the renewables sector in net present value terms over the remainder of the scheme”.19 The bulk of this cross-subsidy comes from fossil fuelled power providers. Little analysis exists of the scale of Australia’s implicit energy subsidies. NIEIR’s 1996 report developed a conservative estimate of the “greenhouse externality” associated with electricity use, which it placed at 1.5¢/kWh for coal and 0.75¢/kWh for natural gas generating facilities.

This produced an annual implicit carbon subsidy to electricity of $1.9 billion, out of a total environmental subsidy of $2.5 billion. Road transport was estimated to receive an implicit subsidy of $0.2-1.3 billion for other types of environmental externalities associated with petroleum use (primarily air pollutants).20 The IMF has made two recent attempts to quantify the implicit subsidies created by not pricing air pollution and greenhouse gas emissions. Its 2013 analysis found that Australia’s implicit subsidies to oil, coal and gas to be worth 1.8 per cent of GDP, or about $23 billion annually.21 This analysis used an estimated carbon subsidy of US$25 per tonne of carbon dioxide (t CO2). The IMF’s 2014 report applied an updated estimate of US$35/tCO2, along with country-specific estimates of the cost of the air pollution from energy-related emissions of sulphur dioxide (SO2), nitrogen oxides (NOx) and PM2.5. This report did not provide an estimate of the total cost of these subsidies to Australian energy.22

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Tackling the implicit subsidy of unpriced carbon

“A charge should be levied on fossil fuels in proportion to their CO2 emissions multiplied by the global damage from those emissions”

Figure 2. The United States’ “Social Cost of Carbon”’ values, 2013 update.

International Monetary Fund

Getting Energy Prices Right 2014

Putting a value on the social benefit of carbon reduction An essential step in valuing the costs of climate change or, conversely, the benefits of avoiding it, is to calculate what those costs are. Such calculations will necessarily involve a range of uncertainties and any estimates will need to be regularly revised. However, estimates that are transparently produced and regularly updated help to ensure that policy decisions take account of improving knowledge and evidence. Several countries, including the United States, Canada and the United Kingdom, have adopted a range of values for carbon emissions to use in decision-making. The US government has developed a set of carbon values to estimate the social cost of carbon (see Box 1). This is an estimate of the economic damage caused by each additional tonne of CO2 emitted into the atmosphere in a given year. Future costs are discounted to represent what society should be willing to pay in the present. The US estimates apply different discount rates and different probability distributions. The 3 per cent average pathway is considered the “central estimate”, while the 3 per cent 95th percentile pathway reflects a one-in-20 risk of significantly greater climate sensitivity.23

The UK government takes a slightly different approach. It has derived carbon valuation trajectories from a long-term national emission target of 80 per cent below 1990 levels which it considers an appropriate UK contribution to global emission reductions consistent with limiting global temperature rise to “as little as possible above 2°C”.24 These carbon values represent an annual cost-pertonne limit on the investment that needs to be triggered for the UK to reach its target. In other words, any emissions reductions that can be achieved at a lower cost per tonne are necessary to reach the target.25 Because the UK participates in multinational emission reduction efforts through the EU Emission Trading System in addition to its domestic emission reduction policies, it has developed separate marginal abatement cost curves for the “traded sector” (industries covered by the EU ETS) and the “non-traded sector”. The prices in each sector align from 2030, reflecting an expectation that international carbon trading will be fully operational from that point.26

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Figure 3. EU Emission Trading System marginal abatement cost curves, traded and non-traded sectors.

Health improvements due to reductions of other pollutants were also quantified and monetised.27 The IMF used a single, simplified US carbon value (US$35/t CO2, based on the central estimate for 2010) to calculate the externalised carbon costs of energy in over 150 countries (IMF 2014).

Figure 4, below, shows several carbon value paths used by the US and UK.

The UK has incorporated carbon valuation into guidance on policy appraisal for all UK government agencies, to use to “assess proposals leading to an increase or a reduction in energy use or greenhouse gas emissions in the UK. It covers proposals that have a direct impact on energy use and supply and those with an indirect impact through planning, construction, land use change or the introduction of new products that use energy.”28

Figure 4. Carbon values, US and UK, selected years How big are Australia’s carbon subsidies to energy? Applying US carbon valuations to carbon emissions from Australian energy allows for an estimate of the implicit carbon subsidy to energy production and use in Australia. Applying the 3 per cent average and 95th percentile values gives a subsidy of approximately $14-39 billion in 2012. This can be broken down by sector: $7-20 billion for electricity, $3-9 billion each for transport and direct combustion, and about $0.3-1 billion for fugitive emissions from resource production. As noted above, the 3 per cent average value is the US government’s central estimate and the 95th percentile represents the 5 per cent risk of significantly greater climate sensitivity. The US carbon values apply only to carbon dioxide emissions, so the costs of other greenhouse gases are excluded. This results in a significant underestimate of the costs of fugitive emissions, in particular, which are mainly methane, a more potent but shorter-lived greenhouse gas than carbon dioxide. *Combined traded and non-traded sector prices, weighted by share of total emissions

The US uses its carbon values to inform cost-benefit analysis. For example, the US Environment Protection Agency (EPA) recently proposed emission performance standards for existing fossil fuel generators. The EPA’s proposal contained costbenefit analysis showing that the societal value of avoided carbon dioxide emissions would reach US$10-92 billion annually by 2030 (range represents the spread of carbon value trajectories).

If Australia fails to internalise these costs in energy prices, the carbon subsidy to energy will continue to increase, due both to growth in energy-related emissions and the higher social cost of emissions as time passes. Figure 5 shows the size of the subsidy for selected years, under the same two US carbon valuation trajectories, based on Treasury projections of a ‘no carbon price’ scenario.29

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Figure 5. Carbon subsidy to Australian energy-related CO2 in the absence of a carbon price or equivalent regulation.

More recent electricity sector projections show a much slower rise in electricity demand growth, so the subsidy to electricity may grow more slowly than Treasury’s projections would indicate. Recent electricity sector demand forecasts produced by ACIL Allen and Jacobs, for example, show electricity demand about 10 per cent lower than Treasury’s projections by 2020, and about 20 per cent lower by 2030.30 31

In 2030 the sector’s carbon emissions would reach 186 million tonnes, for a carbon subsidy of $12-37 billion. The total carbon subsidy to electricity between 2015 and 2030 would be $165-500 billion (Figure 6). Note that this figure already includes a discount rate of 3 per cent. However, reducing the RET would increase emissions from electricity and therefore the carbon subsidy to the sector. The carbon subsidy to the sector would increase by $0.7-2 billion annually by 2020 if the RET were reduced to ensure renewable generation made up no more than 20 per cent of electricity (“Reduced RET), and by $0.8-2.5 billion annually if the RET were closed and existing investments grandfathered (“Abolished RET”). In 2030 the annual subsidy would have increased by $0.7-2.3 billion under a Reduced RET, and $1-3 billion under an Abolished RET. These two scenarios roughly correlate to the recommendations of the Warburton RET Review.

Figure 7. Increase in carbon subsidy to electricity if the RET is reduced or abolished, selected years.

On the other hand, the Treasury modelling scenario used above assumed the maintenance and achievement of the legislated RET. Modelling by Jacobs finds that, assuming lower demand and the current RET, carbon emissions from electricity in 2020 would total 172 million tonnes, for a carbon subsidy of $9-28 billion.32

Figure 6. Electricity sector emissions and carbon subsidy, 2015-2030.

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How should Australia address its carbon subsidies to energy? As the analysis presented above demonstrates, the carbon subsidy provided to energy is far greater any of the explicit financial subsidies currently benefitting Australian fossil fuels, let alone any subsidies to Australian renewable energy. Yet Australian decision-making assigns no weight to carbon damages, effectively ignoring the carbon subsidy and valuing emission reduction at zero economic benefit. The inadequacy of Australia’s current approach was demonstrated by the recent RET Review. This review considered the RET’s cost-effectiveness, finding that the RET imposes additional resource costs of $14 billion over the next years to 2040, and, as noted above, a cross-subsidy of $22 billion, mainly from fossil generators, to renewable generators.

However, in judging that the RET represented too high a cost to the economy, the review ignored the carbon subsidy already provided to the power sector. Instead it relied on unfounded assertions about the ability of policies like the still undeveloped Emission Reduction Fund to achieve emission reductions at lower cost; did not consider any potential emission reduction to be undertaken nationally beyond Australia’s minimum 2020 target of a 5 per cent reduction from 2000 levels; and ignored any benefits of emission reduction. Estimates of the social cost of carbon provide an indication, however imperfect, of what society ought to be willing to pay now to avoid the costs of climate change. Australia would benefit from using a range of estimates of the social cost of carbon as lower bound estimates of the benefits of carbon reduction. This would enable more thorough and realistic assessment of the costs and benefits of decisions that affect Australia’s prospects of carbon reduction and clean energy.

Developing carbon values by calculating the social cost of carbon A social cost of carbon pathway is calculated using one or several Integrated Assessment Models (IAMs), which combine a simplified climate model and a simplified economic model into a cohesive numerical model to capture the feedback effects between the two. This method is at best an incomplete guide to the costs of climate change, and the following weaknesses suggest that the social cost of carbon should be treated as a lower bound estimate in policy making.33 34 35 Estimates of the social cost of carbon apply only to carbon dioxide and exclude the impacts of other greenhouse gas emissions. They are intended to include changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services due to climate change. IAMs do not assign value to all of the impacts of climate change recognized in the climate change literature because of lack of precise information on the nature of damages and because the science incorporated into these models lags behind the most recent research. For example, the models currently completely omit the effects of some large ecosystem changes that drive other climate impacts, such as ocean acidification (which leads to decreased fish supplies and a potential large scale ecosystem collapse) and neglect or only partially address potentially catastrophic damages such as the collapse of the Atlantic Meridional Overturning Circulation or the West Antarctic Ice Sheet, or large releases of methane from melting permafrost and warming oceans. This has resulted in IAM simulations ignoring the possibility of catastrophic events with significant harms to human welfare. Social cost of carbon calculations also take contentious approaches to inter-generational and inter-regional welfare. Inter-generational welfare is approached via the choice of discount rate. As climate impacts occur over long time periods, their costs are highly sensitive to discounting. The common practice of using market interest rates gives a much lower value to benefits accruing to future generations, which has been criticised on ethical grounds. With regard to inter-regional welfare, the social cost of carbon has been criticised for excluding equity weighting. Equity weighting assigns a higher value to a dollar’s worth of damage occurring in a poor region than to one occurring in a wealthy one, in recognition of the latter’s greater adaptive capacity. A well-established methodology for equity weighting is available, but it is not generally used in these estimates. Applying the social cost of carbon to domestic policies is also complicated by the fact that it represents global rather than domestic costs. Given the interdependencies of national economies and the vulnerability of each one to climate impacts on others, however, the distinction between global and local impacts is not clear-cut.

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Endnotes 1

These calculations have applied two U.S. social cost of carbon estimates that use a 3 per cent discount rate and an average and 95th percentile probability weighting. The US estimates also include discount rates of 5 per cent and 2.5 per cent. See Interagency Working Group on Social Cost of Carbon, United States Government, 2013. Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis. http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impactanalysis.pdf. 2 International Energy Agency, 2013. World Energy Outlook 2013. OECD/IEA, Paris. 3 International Monetary Fund, 2013. Energy Subsidy Reform – Lessons and Implications. IMF, Washington, DC. 4 International Energy Agency, 2012. World Energy Outlook 2012. OECD/IEA, Paris. 5 International Monetary Fund, 2014. Getting Energy Prices Right: From principle to practice. IMF, Washington, DC 6 IMF. Getting Energy Prices Right. 7 IMF, Energy Subsidy Reform. 8 National Institute of Economic an Industry Research (NIEIR), 1996. Subsidies to the Use of Natural Resources. Environmental Economics Research Paper No.2. Report prepared for the Department of the Environment, Sport and Territories. 9 ECITA Committee, 2000. The Heat Is On: Australia's Greenhouse Future, The Parliament of the Commonwealth of Australia Senate Environment, Communications, Information Technology and the Arts References Committee, Canberra, November 2000. 10 Chris Riedy, 2007. Energy and Transport Subsidies in Australia, 2007 Update. Final Report For Greenpeace Australia Pacific. Institute for Sustainable Futures, UTS, Sydney. 11 Environment Victoria and Market Forces, 2014. Ending the fossil fuel industry’s age of entitlement: An analysis of Australian Government tax

measures that encourage fossil fuel use and more pollution. http://environmentvictoria.org.au/newsite/sites/default/files/useruploads/EV%20&%20MF_Fossil%20fuel%20subsidies%20in%202014_FINAL.p df. 12 Riedy, Energy and Transport Subsidies. 13 Australian Treasury, 2008. Architecture of Australia's Tax and Transfer System. Paper for the Australia’s Future Tax System Review. Australian Treasury, Canberra. 14 Sinclair Davidson, 2012. Mining Taxes and Subsidies: Official evidence. Minerals Council of Australia Background Paper. http://www.minerals.org.au/file_upload/files/publications/mca_backgrounder_FINAL.pdf 15 Richard Denniss, 2014. “Viewpoints: should fuel tax credits be cut in the budget?”, The Conversation, 12 May 2014. http://theconversation.com/viewpoints-should-fuel-tax-credits-be-cut-in-the-budget-25988 16 G20, 2009. “Leaders’ Statement”, Pittsburgh, 24-25 September 2009. https://www.g20.org/sites/default/files/g20_resources/library/Pittsburgh_Declaration_0.pdf 17 Australian Treasury, 2010. “Australia’s Submission to G20 Energy Experts Group.” Document 10A, documents released under a Freedom of Information request in relation to Australia’s G20 commitment to phase out or eliminate inefficient fossil fuel subsidies and the commitments made by other countries. http://www.treasury.gov.au/Access-to-Information/DisclosureLog/2012/G20-commitments-on-fossil-fuel-subsidies 18 Doug Koplow, 2012. Phasing Out Fossil-Fuel Subsidies in the G20: A Progress Update. Earth Track and Oil Change International. http://priceofoil.org/content/uploads/2012/06/FIN.OCI_Phasing_out_fossil-fuel_g20.pdf 19 Richard Warburton, Brian Fisher, Shirley In’t Veld and Matt Zema, 2014. Renewable Energy Target Scheme: Report of the Expert Panel. Department of Prime Minister and Cabinet, Canberra. 20 NIEIR, Subsidies to the Use of Natural Resources. 21 IMF, Energy Subsidy Reform. 22 IMF, Getting Energy Prices Right. 23 United States Environment Protection Agency, 2013. “Fact Sheet: Social Cost of Carbon”, EPA, November 2013. http://www.epa.gov/climatechange/Downloads/EPAactivities/scc-fact-sheet.pdf 24 Committee on Climate Change, 2008. Building a low-carbon economy – the UK’s contribution to tackling climate change. CCC, London. 25 Department of Energy & Climate Change, 2013. Valuation of energy use and greenhouse gas emissions for appraisal. Supplementary guidance to the HM Treasury Green Book on Appraisal and Evaluation in Central Government. DECC, September. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/254083/2013_main_appraisal_guidance.pdf 26 DECC, 2013. “Tables 1-20: supporting the toolkit and the guidance” [Excel file]. Last updated September 2013. https://www.gov.uk/government/publications/valuation-of-energy-use-and-greenhouse-gas-emissions-for-appraisal 27 EPA, 2014. Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for Modified and Reconstructed Power Plants. EPA -542/R-14-002, EPA, Research Triangle Park, North Carolina. 28 DECC, Valuation of energy use and greenhouse gas emissions for appraisal. 29 Treasury and DIICCSRTE, 2013. Economic modelling of climate change mitigation scenarios to inform Climate Change Authority, 2014. Reducing Australia’s Greenhouse Gas Emissions: Targets and Progress Review—Final Report. http://climatechangeauthority.gov.au/reviews/targets-and-progress-review-3. 30 ACIL Allen Consulting, 2014. RET Review Modelling: Market Modelling of Various RET Policy Options. Report to RET Review Expert Panel, 7 August. https://retreview.dpmc.gov.au/sites/default/files/files/ACIL_Report.pdf. 31 Jacobs, 2014. Impacts of Changes to the RET on Electricity Market Participants. Report for The Climate Institute, Australian Conservation Foundation and WWF Australia. http://www.climateinstitute.org.au/verve/_resources/Jacobs_ImpactsChangingRETonElectricityMarketParticipants_FINAL_140814.pdf 32 Jacobs, Impacts of Changes to the RET. 33 Frank Ackerman and Elizabeth A. Stanton, 2012. “Climate Risks and Carbon Prices: Revising the Social Cost of Carbon”, Economics: The Open-Access, Open-Assessment E-Journal, 6 (2012-10): 1—25. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-10 34 Peter Howard, 2014. Omitted Damages: What’s Missing from the Social Cost of Carbon. Environmental Defense Fund, Institute for Policy Integrity and Natural Resources Defense Council, March. 35 Martin L. Weitzman, 2013. “Tail-Hedge Discounting and the Social Cost of Carbon”, Journal of Economic Literature, 51(3): 873-82.

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